Rosneft Touts $12.45B in 2011 Net Income

Rosneft posted excellent operational and financial results in 2011. Average daily hydrocarbon production (including production by subsidiaries and the Company's share in production by affiliates) rose by 2.6 percent to 2,586 th. boe. In 4Q 2011, hydrocarbon production hit a record of 2,622 th. boe per day.

Average crude oil output increased to 2,380 th. bpd in 2011, which represents a 2.5 percent growth year-on-year. The increase reflects higher production at the Vankor and Verkhnechonsk fields in East Siberia and as part of the Sakhalin-1 project. Crude oil production amounted to 2,396 th. bpd in 4Q 2011.

Marketable gas production in 2011 increased by 3.6 percent year-on-year to 12.79 bcm thanks to higher gas production at Yuganskneftegaz, Samaraneftegaz and Vankorneft fields. In 4Q 2011, marketable gas output grew by 17.7 percent quarter-on-quarter to 3.53 bcm mainly due to the launch of a booster station at the Priobskoye field of Yuganskneftegaz in November 2011.

Petroleum product output totaled 55.4 million tonne in 2011, which is an increase of 15.6 percent year-on-year. The growth reflects acquisition of a stake in Ruhr Oel GmbH in May 2011. In 4Q 2011, petroleum product output was 15.21 million tonne, up 1.5 percent quarter-on-quarter.

Rosneft's revenue amounted to $92.0 billion in 2011, which represents a 46 percent increase year-on-year. The increase resulted from higher crude oil and petroleum product prices as well as from higher hydrocarbon production and refinery throughput. In 4Q 2011, the Company's revenue was $24.0 billion, a drop of 3 percent from the previous quarter. The reduction was caused by lower global crude oil and petroleum product prices and lower sales volumes.

In 2011, Rosneft's EBITDA increased by 15 percent year-on-year, reaching all-time high of $22.0 billion. The increase was tempered by various external factors, including rise of transportation tariffs, strengthening of the rouble and increase in the tax burden particularly due to the expiration of MET and export duty holidays for Vankor crude.

In 4Q 2011, EBITDA decreased by 10.0 percent quarter-on-quarter. The decrease was primarily attributable to the end of Vankor MET holidays (less $315 million), lower global crude oil and petroleum product prices (less $419 million), expediting of the Company's exploration program (less $160 million), increase in product inventories. The negative impact of these factors was partly offset by the change in the export duty calculation formula for crude oil and petroleum products as well as by rouble depreciation against the dollar.

Cash flow from operations in 4Q 2011 was up 22 percent totaling $3.505 billion as compared to $2.864 billion in 3Q. The increase reflects reduction in accounts payable and lower income tax.

The Company's net income reached $12.45 billion in 2011, which is 19.7 percent higher year-on-year. 4Q 2011 net income was $2.99 billion.

Commenting on the results in 2011, Rosneft President Eduard Khudainatov said, "In 2011 Rosneft progressed to a new stage in its development and produced record volumes of oil. The Company's profit figures also reached an absolute historical high. Throughout 2011, the Company fully upheld its social responsibility, implementing a number of important social initiatives and contributing over 1.5 trillion rubles to federal and regional budgets.

"The steady increase in production confirms that Rosneft has chosen the right strategy as it focuses on developing new production regions. In 2011 we concluded an unprecedented strategic agreement with ExxonMobil and have already begun practical implementation of agreements to explore the rich resource base of the Russian Arctic and Black Sea shelves.

"In 2011, as part of a large-scale program to upgrade the Company's refineries, Rosneft completed construction and modernization work at 6 units with total capacity of 6 million tonnes. This included such significant facilities as a new delayed coking unit at the Komsomolsk refinery and a hydrotreatment unit at the Achinsk refinery. Investment in the refinery modernization program in 2011 totalled $3.1 billion. In 2012, the Company plans to invest a further $4.5 billion in this area. From this year's results, we can confidently say that we have made significant progress in our upgrade program.

"Increasing corporate governance standards and transparency at Rosneft has been and will remain an important priority for me personally and for the whole management team. We continue to work daily to boost the quality of our information disclosure and investor relations. I am pleased to say that our efforts have been recently recognized – Rosneft has been named the winner of the Best Financial Disclosure award in the Russia category by the influential global publication World Finance.

"In 2012 the Company will continue efforts to realize its growth potential and boost capitalization. The primary focus will be on our offshore projects, monetization of our gas reserves, development of our refining operations and optimization of our commercial, sales and marketing efforts. We will continue to work for the benefit of our shareholders."

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